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QuidelOrtho Talks Savanna Potential, MDx Opportunities at JP Morgan Conference

SAN FRANCISCO – QuidelOrtho CEO Doug Bryant said during his presentation at the 42nd JP Morgan Healthcare Conference on Monday that the combination of Quidel and Ortho Clinical Diagnostics, completed in May 2022, was intended to jointly leverage the firms' global footprint to expand geographies and capitalize on cross-selling opportunities. Both companies saw "the need to play meaningfully in the molecular diagnostic space," and as integration of the firms continues, the focus is on reducing complexity, improving capital allocation, and portfolio management, Bryant said.

Some of those cross-selling opportunities are tied to the US launch of the firm's Savanna instrument, which received 510(k) clearance from the US Food and Drug Administration last month, along with a panel for the herpes simplex virus and the varicella-zoster virus. The fully integrated, sample-to-result, automated system is designed to analyze up to 12 pathogens or targets, plus four controls, in a single test cartridge using real-time PCR. The HSV 1+2/VZV panel detects and differentiates between HSV-1, HSV-2, and VZV nucleic acids from cutaneous or mucocutaneous lesion specimens.

Bryant noted that QuidelOrtho's lab segment is its largest business by revenue and said that the company "successfully worked" through its large instrument and reagent backlog by Q3 2023 to return to normalized levels. He added that the firm has placed 4,500 analyzers, with 40 percent to 45 percent of placements coming from new customers. He further noted that the China market is back on track for QuidelOrtho's labs business.

The transfusion medicine business, meantime, has about 6,800 immunohematology analyzers placements. Bryant said the segment has the potential to grow in the mid- to high-single digits with "a reasonably modest investment in a higher-volume" next-generation platform. He also noted, however, that certain aspects of the business are "significantly more difficult for us, and it's hard to see how we could fix them," namely the donor screening segment.

"We will do something one way or another to improve that business because it does drag us down," he said. "Whether that ends up in a divestiture … I'm not prepared to say right now."

The firm's point-of-care segment includes approximately 88,000 Sofia instrument placements and about 16,000 Triage placements, Bryant said. Sofia instrument placements are continuing to grow, as the company placed 3,900 platforms in the first nine months of 2023. Forty-eight percent of those placements were from new customers, he added, and 5 percent are only running COVID-19 testing. The Triage instrument makes up a roughly $200 million business, and the company expects growth across geographies as multiple new assays will be launching soon, including a high-sensitivity troponin test in the US expected to launch by the end of 2024.

QuidelOrtho has increased its influenza testing market share between October 2022 and October 2023 from roughly 38 percent to 41 percent, according to Bryant. QuidelOrtho is also the market leader in testing for respiratory syncytial virus with a 46 percent market share, up more than 5 percent year over year, he added.

Molecular diagnostics, however, will provide "the largest opportunity for growth," particularly in the infectious disease market, Bryant said. The firm has already shipped Savanna instruments and has an inventory of platforms, he noted. Although the market for the HSV/VZV test is smaller, QuidelOrtho views it as a "gatekeeper assay" to begin instrument placements. Once the firm's four-target respiratory panel is cleared by the FDA, placements will likely accelerate. He added that he expects the RVP4 panel to be on the market before the end of Q1 2024. QuidelOrtho has a revenue run rate goal of more than $250 million for Savanna in the three years following the US launch.

Bryant added that the instrument will be "serving a market that has been waiting for something that could decentralize molecular testing." But while the US launch of Savanna is important, Bryant noted it is "one product initiative in an overall larger molecular strategy."

On the capital allocation side, QuidelOrtho is focusing on research and development investments, paying down debt, share repurchases, and investments in manufacturing infrastructure, as well as potential tuck-in M&A deals, Bryant said.

"We do want to be positioned to be opportunistic with tuck-in M&A that can accelerate our growth, increase our market share, or provide entry into adjacent market segments as well," he said.